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Monday April 21, 2014

Finances

Finances
 

Will Pandora's Stock Continue to Rise?

Pandora Media, Inc. (P), an internet radio company, reported its third quarter earnings on Thursday, November 21. The company reported better-than-expected revenue for the latest quarter, but lowered guidance for the fourth quarter.
 
Pandora reported total revenue of $180.38 million for the quarter.  This represents an increase of 50.3% over the same period last year.  This revenue figure was above analysts’ expectations of $175 million in revenue.
 
The company announced a quarterly net loss of $1.7 million. This is a significant difference from last year when the company reported net income of $2.05 million. 
 
“Pandora continues to monetize effectively across the board,” said Brian McAndrews, Chairman, President and CEO of Pandora. “Mobile advertising revenue surpassed the $100 million milestone during the quarter, which drove increased operating leverage.  At the same time, Pandora continues to lead the market in mobile innovations, with a complete redesign for the iPad and the debut of the Android tablet app.  We plan to continue to aggressively invest in the business as we seek to deliver the best personalized radio service for users.”
 
The company has performed well this year.  Pandora’s stock price has risen 280% since November 21, 2012.  Additionally, advertising revenue increased 36% and subscriptions and other revenue increased 162% year over year.  However, despite Pandora’s strength in 2013, some analysts are concerned that the company is now overvalued. Also, the company lowered its guidance for the fourth quarter from earnings of $0.04 per share to $0.02 per share. Finally, with the launch of Apple’s iTunes Radio in September, many investors are concerned that Pandora’s growth will begin to slow as listeners choose to use Apple’s new platform.
 
Pandora Media, Inc. (P) shares ended the week at $29.23, down 7.5% for the week.
 

Target’s Canada Debut Not so Good, Eh?


Target Corporation (TGT), a general merchandise store, reported its quarterly earnings on Thursday, November 21. 
 
Target reported total revenue of $17.26 billion for the quarter.  This represents an increase of 1.9% over the same period last year when the company reported revenue of $16.93 billion. 
 
The company reported net income of $341 million.  This is a decrease of 46.5% from the comparable quarter last year when the company reported net income of $637 million.
 
“Target’s third quarter financial results reflect continued strong execution in our U.S. Segment in an environment where consumer spending remains constrained,” said Gregg Steinhafel, President and CEO of Target. “As our focus shifts to the fourth quarter, we are intently focused on delivering outstanding merchandise, an easy, fun shopping experience and an unbeatable combination of everyday low prices, weekly ad discounts, 5% REDcard Rewards and price match policies throughout the U.S. and Canada.  And, in our Canadian Segment, we are also focused on improving performance as we transition from opening to operating our 124 stores.”
 
Target opened 124 stores in Canada this year.  Target’s Canadian Segment generated $333 million in revenue during the latest quarter and reported a $238 million loss before interest and taxes.  This loss was larger than expected and caused Target’s earnings per share to fall by $0.29 per share.  Target executives had expected costs associated with the Canadian Segment to cut into earnings per share by only $0.22 per share.  Target stores in Canada are generating lower sales and are facing tougher competition than expected.  It remains to be seen whether Target’s foray into Canada will be a successful one.
 
Target Corporation (TGT) shares ended the week at $63.68, down 4.5% for the week. 
 

Williams-Sonoma is Heating Up


Williams-Sonoma Inc. (WSM), a specialty retailer of home products, announced its quarterly results on Wednesday, November 20.   The company reported strong earnings and increased guidance for the end of the year.
 
Williams-Sonoma reported revenue of $1.05 billion for the quarter.  This represents an increase of 11.3% over the same period last year when the company reported revenue of $944.55 million. 
 
The company reported net income of $56.72 million.  This represents an increase of 16% from the comparable quarter last year when the company reported net income of $48.9 million. 
 
“Our strong third quarter and our performance year-to-date illustrate the power of our business model and the relevancy of our brands,” said Laura Alber, President and CEO of Williams-Sonoma.  “We delivered an 11% increase in revenue and EPS growth in excess of 18%.  We are well positioned heading into the holiday season and will continue to execute our key strategies to deliver an exceptional experience for our customers.”
 
Williams-Sonoma offers cooking classes to the general public for a fee. In November, class offerings were Thanksgiving focused, including: “A Bird to Brag About,” “Off-the-Platter Turkey,” “Choose Your Sides” and “Pie, Pie and More Pie Please.” In addition to classes, Williams-Sonoma has started a cooking school with locations in San Francisco and Chicago.
 
Williams-Sonoma Inc. (WSM) shares ended the week at $58.76, up 3.25% for the week.
 
The Dow started the week of 11/18 at 15,963 and closed at 16,065 on 11/22. The S&P 500 started the week at 1,799 and closed at 1,805. The NASDAQ started the week at 3,990 and closed at 3,992.
 

Treasuries Rise on Jobless Claims Report

The 10-year Treasury note yield reached its highest level in two months on November 21, causing investors to enter the market.  This rise in yield was spurred by economic data released earlier in the week.
 
On November 21, the U.S. Department of Labor announced that initial jobless claims fell to 323,000 for the week ending November 16. This is a decrease of 21,000 claims from the previous week, which is a larger drop than analysts had expected.
 
“We expect the momentum in the jobs market to continue and that the Federal Reserve will start reducing bond purchases in the first quarter of next year,” said Alessandro Giansanti, Senior Rates Strategist at ING Bank. “Tapering is just a matter of when and not if.  Treasury yields have room to rise further.”
 
The 10-year Treasury note yield rose to 2.84% on Thursday, November 21.  The yield fell three basis points in early trading on Friday, November 22. 
 
In addition to whether or not the Federal Reserve will taper its bond purchases, investors are wondering whether the Federal Reserve will raise borrowing rates.  The Federal Reserve has consistently said that it will keep short-term borrowing rates near zero until the unemployment rate drops below 6.5% as long as inflation stays below 2.5%.  The Department of Labor announced that the U.S. unemployment rate in October was 7.3%.
 
Finally, the Senate Banking Committee backed Janet Yellen to become the next Federal Reserve Chairman on Thursday, November 21.  Ms. Yellen has been a staunch supporter of bond purchases and low borrowing rates. At a Senate hearing Yellen said, “We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession.”  Many believe that if she is confirmed she will support continuing current monetary policy.
 
The 10-year Treasury note yield finished the week of 11/18 at 2.75% while the 30-year Treasury note yield finished the week at 3.84%.
 

Interest Rates Fall Slightly

Freddie Mac released the results of its weekly Primary Mortgage Market Survey (PMMS) on Thursday, November 21.  The results showed fixed mortgage rates falling slightly as a result of weak economic data.
 
The 15-year fixed rate mortgage averaged 3.27% this week, representing a decrease from last week when it averaged 3.35%.  One year ago at this time, the 15-year fixed rate mortgage averaged 2.63%. 
 
This week, the 30-year fixed rate mortgage averaged 4.22%. This represents a decrease from last week when it averaged 4.35%.  Last year at this time, the 30-year fixed rate mortgage averaged 3.31%.
 
“Fixed mortgage rates fell this week on reports of weaker manufacturing growth and declines in overall inflation rates,” said Frank Nothaft, Vice President and Chief Economist at Freddie Mac. “Industrial production slipped by 0.1% in October, below the market consensus forecast of a 0.2% gain.  The consumer price index also unexpectedly fell during the month.  On an annual basis, consumer prices are up 1%, the smallest increase since October 2009.”
 
The money market fund finished this week of 11/18 at 0.4%. The 1-year CD finished at 0.7%.

Published November 22, 2013


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